1H19 CNP of RM14.2m came within expectation at 45% of full-year estimate. Property sales of RM140.8m are on track to meet our RM234.0m target. An interim dividend of 3.0 sen was declared, within our estimates. Moving forward, launches will come from Taman Perindustrian Cemerlang and Tanjung Senibong while unbilled sales of RM213.5m is expected to provide less than a year of visibility. Maintain MARKET PERFORM and TP of RM1.30.

1H19 CNP came within expectation. 1H19 CNP of RM14.2m came within expectation at 45% of our full-year estimate. No consensus numbers available. Property sales of RM140.8m are on track to meet our FY19E sales target of RM234.0m. An interim dividend of 3.0 sen was declared, also within our expectation.

Results Highlight. YoY-Ytd, 1H19 revenue increased by 11% mainly due to higher billings from the property development and construction segment. However, 1H19 CNP was down 33% likely from higher portion of affordable housing being recognised, which saw EBITDA margin falling to 20% (-8ppt). QoQ, 2Q19 CNP was higher by 239%, driven by: (i) higher revenue recognised (+74%) from higher billings from the property development and construction segment, and (ii) improvement in EBITDA margin (+7.0ppt) likely from a better product mix, comprising more mid-market residential properties compared to affordable housing being recognised.

Outlook. Currently, its unbilled sales stand at RM213.5m, providing less than one year’s visibility. As of 1H19, they have launched 17 units of terrace factories at Taman Perindustrian Cemerlang, 24 units of shop offices, 102 units of mid-market landed residential properties and 204 units of affordable housing at Bukit Cemerlang with a total GDV of RM162.8m. Moving forward, the group plans to launch 23 units at Taman Perindustrian Cemerlang and 222 units of affordable housing at Tanjung Senibong.

Earnings unchanged. Post results, there are no changes to our FY19- 20E estimates.

Maintain MARKET PERFORM. We reiterate our MARKET PERFORM call on the stock with an unchanged Target Price of RM1.30 based on a RNAV discount of 79%, which is at its historical high levels. We believe such valuations levels are fair considering its full exposure to Johor.

Downside risks to our call include; lower-than-expected margins/property sales, higher-than-expected administrative costs, negative real estate policies, and tighter lending environment.

Source: Kenanga Research - 28 Sep 2018